5 Common Reasons People Put Off Estate Planning – And Why They Shouldn’t
More than 80 percent of people 55 and older have never set up the crucial components of an estate plan (a will and powers of attorney so that their wishes can be carried out in case they become too incapacitated to manage their affairs or after they pass away). The percentage is even larger for younger people.
Yet the fact is, everyone should have an estate plan, regardless of their age. Few people like to think about the end of their life, true. But this isn’t a good reason to leave your hard-earned money, assets and life in the hands of your state’s court system. Chances are, you won’t like their plans.
Here are 5 of the most common misconceptions we see when it comes to estate planning, as well as what can happen because of these assumptions.
1. I Don’t Own Enough
The feeling that you don’t own enough to warrant an estate plan may be the single most widespread reason people hold off. Likely, it’s the common association of the word “estate” with a large and luxurious house.
But “estate” in planning terms simply means your assets. And the fact is, just about everyone has assets, no matter their age. A single piece of jewelry or clothing is an asset. So is a checking account. So is a retirement account. So is a home and a family business.
An estate plan includes an orderly strategy for the disposition of these assets, via a will. If you were to pass away suddenly, do your family and friends have a master list of contacts, an itemization of property or an itemization of accounts and personal information, such as your wishes? A will provides all these elements.
If you don’t have a will, there is simply no direction about where you want your assets to go.
Wills generally go through probate, a legal process that includes authenticating the will, paying any debts in any orderly fashion and overseeing the distribution of property. If you have a will, the movement through probate can be as quick as possible.
If you don’t have a will, your assets could be tied up in probate for months or even years, leaving your loved ones without the assets you’d like them to have.
If you have underage children, a will also contains a plan for them in the event of your passing. If you don’t have a will, their housing, schooling and other elements of their upbringing could proceed in a way you don’t want.
Make sure your estate plan coincides with your financial and retirement planning efforts. The best wealth advisors in St. Louis can’t prevent the unexpected from happening. But what they can do is help you plan for it.
It’s never too early to start planning for the future. Contact Paradigm Financial Advisors and get the conversation started.
2. I’m Not Old Enough to Start Worrying About My Estate; I Have Plenty of Time
The misconception that younger people aren’t old enough for an estate plan or have plenty of time to make one is also extremely common. But accidents or sudden illness can occur at any time.
You may be in good health. You may have longevity in your genes. You may stay active and eat healthy. But if 2020 has taught us anything, it’s that things don’t always go as planned.
Establishing a plan for the unexpected, such as sudden death or incapacitation, can help you and your loved ones if something was to happen.
3. I’m Busy
Life can be hectic. Kids, work, chores, family vacations, school – the list can go on and on. But it’s important to make time for priorities like estate planning. If you never find time, your wishes are never shared and therefore, likely not carried out.
Estate planning doesn’t have to be an overwhelming process, especially if you get started early. Set aside some time on a weekend or on a day when you usually have some down time. Make an appointment with yourself to do it. The best wealth advisors in St. Louis can’t turn back time.
4. I’m Not Sure Where to Start
It’s not uncommon to be confused about what an estate plan includes. After all, wills and powers of attorneys are not something most people deal with every day!
Here’s a list of some key components to help you get started:
- A Last Will and Testament: This will allow you to itemize where you want your assets to go. It can also include your wishes for burial.
- A Living Trust: A living will or trust specifies where and to whom you want your assets to go, just like a Last Will and Testament. But with a living trust, the transfer of assets takes place when you are alive, not after your death. Why do people use these documents? Because a living trust allows you to skip probate altogether and can be less expensive than a standard will.
- A Trust: A trust sets up your assets with a third party, a trustee, who oversees the disbursal. This will direct not only the amounts and beneficiaries, but the timing of the disbursal. Trusts can be set up for many purposes, including tax minimization and charitable giving.
- Financial Power of Attorney: A financial power of attorney gives a designated person the rights to manage your financial affairs should you become too ill or incapacitated to do so. Without one, your loved ones may not be able to pay bills or see to house maintenance (unless you have joint financial accounts).
- Medical Power of Attorney: A medical power of attorney gives a designated person the rights to manage your healthcare and medical treatment should you become too ill or incapacitated to do so.
Both powers of attorney can be set up to be nondurable or durable. If you set up a nondurable power of attorney, the rights to manage the affairs reverts to you once you have recovered. If you set up a durable power of attorney, your designee will retain the rights to manage your affairs.
Without these components of an estate plan, your loved ones may be confused not only about your wishes, but about the best course of action. Do you want extensive medical treatment, for example, if your condition is terminal? If you are ill, not knowing your wishes can add to your loved ones’ stress and confusion.
In addition, your loved ones may suffer a financial burden, because they may not be able to access any of your assets to keep their own lives financially afloat.
5. I Don’t Want to Think About It
Not wanting to think about your own demise or end of life is completely understandable. But it can be stressful and even dangerous for your loved ones. Your assets may be left to the wrong people or organizations. Many people assume that just because they’re married, have had verbal conversations with their business partners or have children they think will automatically inherit their assets, that they are covered. It’s great to have these conversations, but ultimately, you will need to have legal documents drafted to make sure your wishes are actually carried out.
Don’t Set It and Forget It!
There’s always a reason for not doing something, but another mistake we see people make is setting up their estate plan and never revisiting it. Remember: Life doesn’t always go as planned.
It’s important to update your estate plan periodically. Why? You may have originally left assets to a partner you’re no longer with or to loved ones who have passed away. Maybe your original plan was created before the birth of younger children and they’re not included. In these cases, probate and contesting a will can be extremely stressful and difficult for your heirs.
Don’t put off your estate planning any longer. If you’d like help, contact us. Paradigm Financial Advisors was one of the first fee-only fiduciary firms serving business owners, professionals and families in the greater St. Louis area. We bring financial planning, investment management, and estate and tax planning together to help clients – and their families – achieve their financial goals.